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Market investigations under the Enterprise Act 2002

This page provides links to and extracts from legislation and official guidance documents related to market investigations under the Enterprise Act 2002 (the replacement for scale or complex monopoly inquiries under the Fair Trading Act 1973).

Criteria for making references

131.  Power of OFT to make references

(1) The OFT may, subject to subsection (4), make a reference to the Commission if the OFT has reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(2) For the purposes of this Part any reference to a feature of a market in the United Kingdom for goods or services shall be construed as a reference to

(a) the structure of the market concerned or any aspect of that structure;

(b) any conduct (whether or not in the market concerned) of one or more than one person who supplies or acquires goods or services in the market concerned; or

(c) any conduct relating to the market concerned of customers of any person who supplies or acquires goods or services.

(3) In subsection (2) "conduct" includes any failure to act (whether or not intentional) and any other unintentional conduct.

(4) No reference shall be made under this section if- (a) the making of the reference is prevented by section 156(1); or (b) a reference has been made under section 132 in relation to the same matter but has not been finally determined.

(5) References in this Part to a market investigation reference being finally determined shall be construed in accordance with section 183(3) to (6).

(6) In this Part "market in the United Kingdom" includes- (a) so far as it operates in the United Kingdom or a part of the United Kingdom, any market which operates there and in another country or territory or in a part of another country or territory; and (b) any market which operates only in a part of the United Kingdom; "market investigation reference" means a reference under this section or section 132; and references to a market for goods or services include references to a market for goods and services.

Official guidance

The OFT has produced guidance on its approach to deciding whether to make a reference under Section 131.

Regulated sectors

Some industry regulators (CAA, Ofcom, Ofgem, Ofreg, Ofwat and ORR) have concurrent powers with the OFT to make references under Section 131: see Part 2 of Schedule 9, which amends the sectoral privatisation/regulation statutes to refer to Enterprise Act 2002 market investigations instead of Fair Trading Act 1973 monopoly inquiries. The regulator's statutory duties, for example Section 4 of the Railways Act 1993], apply to decisions under Section 131 as they did to decisions under the Fair Trading Act 1973.

Scale monopoly inquiries and interaction with Competition Act 1998

The white paper which led to the Enterprise Act 2002 stated that:

6.59      Government policy is that where possible, the OFT should use the Competition Act 1998 or EC law, if empowered to do so, to deal with problems arising from the dominance of a company, save in exceptional circumstances. The Government decided in 1997 that the Fair Trading Act provisions could be used where undertakings engage in repeated breaches of the prohibition, or in regulated sectors with high market power where restructuring may be appropriate. This policy will also apply to the use of the new market investigation powers.

Overruling by Ministers of decisions not to refer

132.  Ministerial power to make references

(1) Subsection (3) applies where, in relation to any goods or services, the appropriate Minister is not satisfied with a decision of the OFT not to make a reference under section 131.

(2) Subsection (3) also applies where, in relation to any goods or services, the appropriate Minister (a) has brought to the attention of the OFT information which the appropriate Minister considers to be relevant to the question of whether the OFT should make a reference under section 131; but (b) is not satisfied that the OFT will decide, within such period as the appropriate Minister considers to be reasonable, whether to make such a reference.

(3) The appropriate Minister may, subject to subsection (4), make a reference to the Commission if he has reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(4) No reference shall be made under this section if the making of the reference is prevented by section 156(1).

(5) In this Part "the appropriate Minister" means (a) the Secretary of State; or (b) the Secretary of State and one or more than one other Minister of the Crown acting jointly.

Appeals to CAT

Besides Minister's special powers under Section 132, there is a right of appeal available to all interested parties by way of judicial review heard by the Competition Appeal Tribunal. This may be used against decisions to refer or against the outcome of the Competition Commission inquiry.

179. Review of decisions under Part 4

(1) Any person aggrieved by a decision of the OFT, the appropriate Minister, the Secretary of State or the Commission in connection with a reference or possible reference under this Part may apply to the Competition Appeal Tribunal for a review of that decision.

(2) For this purpose "decision"- (a) does not include a decision to impose a penalty under section 110(1) or (3) as applied by section 176; but (b) includes a failure to take a decision permitted or required by this Part in connection with a reference or possible reference.

(3) Except in so far as a direction to the contrary is given by the Competition Appeal Tribunal, the effect of the decision is not suspended by reason of the making of the application.

(4) In determining such an application the Competition Appeal Tribunal shall apply the same principles as would be applied by a court on an application for judicial review.

(5) The Competition Appeal Tribunal may- (a) dismiss the application or quash the whole or part of the decision to which it relates; and (b) where it quashes the whole or part of that decision, refer the matter back to the original decision maker with a direction to reconsider and make a new decision in accordance with the ruling of the Competition Appeal Tribunal.

(6) An appeal lies on any point of law arising from a decision of the Competition Appeal Tribunal under this section to the appropriate court.

(7) An appeal under subsection (6) requires the permission of the Tribunal or the appropriate court.

(8) In this section- "the appropriate court" means the Court of Appeal or, in the case of Tribunal proceedings in Scotland, the Court of Session; and "Tribunal rules" has the meaning given by section 15(1).

Competition Commission inquiry

133.  Contents of references

(1) A market investigation reference shall, in particular, specify (a) the enactment under which it is made; (b) the date on which it is made; and (c) the description of goods or services to which the feature or combination of features concerned relates.

(2) A market investigation reference may be framed so as to require the Commission to confine its investigation into the effects of features of markets in the United Kingdom for goods or services of a description specified in the reference to the effects of features of such of those markets as exist in connection with (a) a supply, of a description specified in the reference, of the goods or services concerned; or (b) an acquisition, of a description specified in the reference, of the goods or services concerned.

(3) A description of the kind mentioned in subsection (2)(a) or (b) may, in particular, be by reference to (a) the place where the goods or services are supplied or acquired; or (b) the persons by or to whom they are supplied or by or from whom they are acquired.

134.  Questions to be decided on market investigation references

(1) The Commission shall, on a market investigation reference, decide whether any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(2) For the purposes of this Part, in relation to a market investigation reference, there is an adverse effect on competition if any feature, or combination of features, of a relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(3) In subsections (1) and (2) "relevant market" means (a) in the case of subsection (2) so far as it applies in connection with a possible reference, a market in the United Kingdom- (i) for goods or services of a description to be specified in the reference; and (ii) which would not be excluded from investigation by virtue of section 133(2); and (b) in any other case, a market in the United Kingdom (i) for goods or services of a description specified in the reference concerned; and (ii) which is not excluded from investigation by virtue of section 133(2).

(4) The Commission shall, if it has decided on a market investigation reference that there is an adverse effect on competition, decide the following additional questions (a) whether action should be taken by it under section 138 for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition; (b) whether it should recommend the taking of action by others for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition; and (c) in either case, if action should be taken, what action should be taken and what is to be remedied, mitigated or prevented.

(5) For the purposes of this Part, in relation to a market investigation reference, there is a detrimental effect on customers if there is a detrimental effect on customers or future customers in the form of (a) higher prices, lower quality or less choice of goods or services in any market in the United Kingdom (whether or not the market to which the feature or features concerned relate); or (b) less innovation in relation to such goods or services.

(6) In deciding the questions mentioned in subsection (4), the Commission shall, in particular, have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the adverse effect on competition and any detrimental effects on customers so far as resulting from the adverse effect on competition.

(7) In deciding the questions mentioned in subsection (4), the Commission may, in particular, have regard to the effect of any action on any relevant customer benefits of the feature or features of the market concerned.

(8) For the purposes of this Part a benefit is a relevant customer benefit of a feature or features of a market if

(a) it is a benefit to customers or future customers in the form of (i) lower prices, higher quality or greater choice of goods or services in any market in the United Kingdom (whether or not the market to which the feature or features concerned relate); or (ii) greater innovation in relation to such goods or services; and

(b) the Commission, the Secretary of State or (as the case may be) the OFT believes that (i) the benefit has accrued as a result (whether wholly or partly) of the feature or features concerned or may be expected to accrue within a reasonable period as a result (whether wholly or partly) of that feature or those features; and (ii) the benefit was, or is, unlikely to accrue without the feature or features concerned.

168. Regulated markets

(1) Subsection (2) applies where the Commission or the Secretary of State is considering for the purposes of this Part whether relevant action would be reasonable and practicable for the purpose of remedying, mitigating or preventing an adverse effect on competition or any detrimental effect on customers so far as resulting from such an effect.

(2) The Commission or (as the case may be) the Secretary of State shall, in deciding whether such action would be reasonable and practicable, have regard to the relevant statutory functions of the sectoral regulator concerned.

(3) In this section "relevant action" means-

(a) modifying the conditions of a licence granted under section 7 of the Telecommunications Act 1984 (c. 12);
and so on for other sectors
...

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Last changed by Franck at 7:36 PM on Wednesday 10 January 2007.

Reference for this page:
Reckon Open "Market investigations under the Enterprise Act 2002" 2007-01-10T19:36:49